I'm looking for further clarification on whether this is a true RESPA requirement or not. I know the regulation states that a short year statement should be provided, but had sat in on an examiner round table which this question was asked and the response was that it was meant for loss mitigation situations, not true paid if in full loans. I'm trying to decide if this is an element I should include in my review or not. Any feedback would be appreciated, thank you!

RESPA doesn't say "should" it is says "shall submit" a short year statement. I don't think it can get much clearer.

RESPA states "1024.17(I)(4)iii. Short year statement upon loan payoff. If a borrower pays off a federally related mortgage loan during the escrow account computation year, the servicer shall submit a short year statement to the borrower within 60 days after receiving the pay-off funds."

From the Exam Manual RESPA Short-Year Statements – 12 CFR 1024.17(i)(4)
Short-year statements can be issued to end the escrow account computation year and establish the beginning date of the new computation year. Short-year statements may be provided upon the transfer of servicing and are required upon loan payoff. The statement is due to the borrower within 60 days after receiving the pay-off funds.